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Shares of Sutro Biopharma Inc. traded 21% higher after the company announced it entered into a global collaboration agreement with Japan's Astellas Pharma to advance three novel immunostimulatory antibody-drug conjugates.

Clinical-stage oncology company Sutro Biopharma Inc. (STRO:NASDAQ), which is engaged in developing next-generation cancer therapeutics, and global pharmaceutical firm Astellas Pharma Inc. (ALPMF:OTCPK; 4503:TYO) yesterday announced that the two companies had entered into "a worldwide, strategic collaboration and licensing agreement focused on the discovery and development of novel immunostimulatory antibody-drug conjugates (iADCs)."

Under the terms of the agreement, Astellas Pharma will pay Sutro Biopharma an upfront payment of $90 million to develop iADCs for three specific, agreed-upon biological targets. In addition, if certain development, regulatory and commercial milestones are achieved, the company is eligible to receive up to another $422.5 million for each respective product candidate, plus additional tiered royalties on worldwide sales of any commercially launched products.

The firms indicated that the partnership is expected to take advantage of Sutro Biopharma's expertise in engineering complex conjugated antibodies and match it with Astellas Pharma's global network and oncology research and development experience.

The report explained that iADCs are widely viewed as a next-generation modality for treating cancer. These iADCs are each specifically designed to boost anti-cancer activity, which provides cancer patients who do not respond to existing cancer immunotherapies with new promising treatment options. An iADC is designed to combine an antibody with a small molecule compound that acts to induce immunogenic cell death together with an immune activating molecule capable of potentially increasing anti-cancer action.

Sutro Biopharma's CEO William J. Newell commented, "We are delighted to work with Astellas, a premier biopharmaceutical company with substantial expertise in immuno-oncology, on this novel modality…iADCs hold promise well beyond the existing success of ADCs."

Newell explained further that "the company's unique conjugation technology enables dual conjugations that site-specifically incorporate a potent cytotoxin that can directly kill tumor cells together with an immunostimulatory component that has the potential to locally prime an immune response to the patient's particular tumor cells."

Astellas Pharma's Chief Strategy Officer Naoki Okamura remarked, "Astellas considers Immuno-Oncology as one of the Primary Focuses of its R&D strategy; our goal is to bring effective drugs to patients who do not respond to existing immune checkpoint inhibitors…The strategic partnership with Sutro will help us expand our pipeline and widen the choice of cancer immunotherapies."

The firms plan to leverage Sutro's strengths in iADC development with Astellas' global R&D and commercialization capabilities. Sutro will be responsible for conducting research and preclinical studies in order to identify the three best initial candidate compounds and then Astellas will move forward with the pursuit and management of clinical studies.

Sutro Biopharma is a clinical-stage oncology firm based in South San Francisco, Calif. The company is focused on the discovery and development of next-generation cancer therapeutics including site-specific, novel-format antibody drug conjugates (ADCs), bispecific antibodies and cytokine-based derivatives targeting immuno-oncology pathways.

The company's approach is geared toward designing and developing targeted medicines by innovating outside the constraints of the cell, which allows it to be unconstrained by traditional cell-based discovery methodologies. The company asserts that its technology does not just kill the tumor but additionally elicits immunogenic cell death. The firm's is currently evaluating two separate wholly owned ADCs in the clinical trials. These studies include STRO-002 for treating ovarian and endometrial cancers and STRO-001 for use in targeting B cell malignancies.

Astellas is a global pharmaceutical company headquartered in Tokyo, Japan. The firm manufactures, markets, imports and exports pharmaceuticals and conducts operations over 70 countries. The company stated that it focuses on biology and modality to continually identify new drugs to address diseases with high unmet medical needs. Some of the firms leading medicines include an androgen receptor signaling inhibitor for prostate cancer, a FLT3 inhibitor for adult patients with relapsed or refractory acute myeloid leukemia with a FLT3 mutation-positive and a treatment solution for adult patients with locally advanced or metastatic urothelial cancer, along with numerous other medicines.

Sutro Biopharma started the day with a market cap of around $203.2 million with approximately 46.9 million shares outstanding and a short interest of about 9.75%. STRO shares opened 15% higher today at $4.98 (+$0.65, +15.01%) over yesterday's $4.33 closing price. The stock has traded today between $4.85 and $5.72 per share and is currently trading at $5.25 (+$0.92, +21.25%).

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